ERCOT says environmental rules could impact Texas gas-fired capacity

May 11, 2011

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Environmental rules could force the retirement of more than 8,000 MW of gas-fired generation in and around Dallas/Fort Worth and Houston, according to a new report by the Electric Reliability Council of Texas (ERCOT). ERCOT has 42,732 MW of gas-fired capacity out of a total of more than 75,000 MW.

The state's grid operator also said a "significant amount" of coal-fired generation is unlikely to be retired, based on current compliance requirements. ERCOT plays host to almost 19,000 MW of coal-fired capacity.

The report, “Review of the Potential Impacts of Proposed Environmental Regulations on the ERCOT System,” was requested by the chairman of the Public Utility Commission in December 2010.

The report concluded a significant amount of coal-fired generation is unlikely to be retired, based on currently available information regarding compliance requirements, unless several factors such as low natural gas prices and carbon emission fees combine to reduce the economic viability of these units.

It said older gas steam units that are subject to retrofit requirements are more likely to be retired. Closed-loop cooling tower requirements proposed as changes to the Clean Water Act are likely to result in the retirement of more than 8,000 MW of gas-fired generation, with a majority of these units in or near Dallas/Fort Worth and Houston. ERCOT said without additional replacement generation, the loss of this gas-fired generation would reduce generation reserve margins to below 2 percent in 2015.

The report also said development of new gas-fired peaking capacity may require sufficient hours of scarcity pricing to justify new investment and sufficient lead time for favorable market conditions to become apparent.

ERCOT also said preliminary analysis indicates that the loss of gas-fired generation would impact transmission reliability in the Houston and Dallas/Fort Worth areas. Redeveloping existing generation sites in these areas with new generating units could reduce or delay the need for additional transmission infrastructure and would likely lead to substantial savings to the overall ERCOT system.